Like A Bad Habit: Bank of America Dropped from Dow

The Dow Jones Industrial Average is one of the most closely followed indicators of how well, or badly, the stock market is doing. The Dow is an average, consisting of 30 companies from different industries, which gauges how the market is faring overall. However, today the Dow announced it will be reshuffling the average and Bank of America is one of the odd men out.

According to nytimes.com:

“The bank, whose entry into the Dow was announced in November 2008, has been working to shrink its business in the aftermath of the financial crisis. It has faced an array of legal issues, many stemming from its acquisition of the subprime lender Countrywide Financial in 2008. While Bank of America’s stock is still trading well below its pre-crisis level, it has experienced gains in recent months after doubling last year.

“In a statement on Tuesday, Bank of America noted the strong performance of its stock compared with the other companies in the index. ‘This decision has no impact on our business or our strategy for providing solid returns to shareholders,’ the company said.”

Bank of America’s stock, like most banks’ stocks, was beaten up pretty badly during the financial crisis. Even though Bank of America has made a strong rebound from the depths of the crisis, the bank is still marred by its acquisitions of Meryl Lynch and the Countrywide Financial. Bank of America is being replaced in the Dow by Goldman Sachs, which also faced a low stock price during the Great Recession, but currently has a far healthier balance sheet due its strong investment portfolio.

Also being replaced in the Dow: aluminum company Alcoa and Hewlett Packard.